Event

According to the company's annual report of 2021 and quarterly report of 2022, the operating income in 2021 was 1.776 billion yuan, an increase of 35.03% over the same period last year. The net profit attributable to shareholders of listed companies was 98.9921 million yuan, down 26.01% from the same period last year. The net profit attributable to shareholders of listed companies after deducting non-recurring gains and losses was 50.7229 million yuan, down 53.58% from the same period last year; and basic earnings per share was 0.44 yuan per share. In the first quarter of 2022, the operating income was 445 million yuan, an increase of 13.52 percent over the same period last year; the net profit attributed to the owner of the parent company was 6.7041 million yuan, down 43.3 percent from the same period last year; and basic earnings per share was 0.03 yuan, down 40.0 percent from the same period last year.

Brief comment

The industry is booming and the company's revenue is growing rapidly; high labor costs and high R & D investment lead to a decline in net profit. Benefiting from the overall promotion of the digital transformation of the banking industry, the market scale of banking IT solutions continues to grow, and the company has successfully won a number of influential projects in the industry by virtue of its customer advantages and product competitiveness in its main business direction. In 2021, the company achieved operating income of 1.776 billion yuan, an increase of 35.03% over the same period last year. In 2021, the company realized deduction of non-net profit of 50.7229 million yuan, down 53.58% from the same period last year. Excluding the influence of 40.3693 million yuan in share payment fees, non-net profit still decreased by 16.6% compared with the same period last year. The main reasons are: (1) the number of employees in the company increased in 2021 and the competition for talents in the industry was fierce. The per capita cost increased, and the total salary of employees increased by 36.1% in 2021, including 16.9% increase in personnel. Per capita salary 16.4% (2) in order to strengthen technological innovation, maintain technological leadership, and enhance core competitiveness, the company's R & D expenditure increased to 237 million yuan in 2021, accounting for 13.32% of revenue, an increase of 2.39 percentage points over 2020.

Expand and deepen large customers, fully benefit from the current industry business cycle, the basic business growth is stable. The company has established good cooperative relations with more than 300 customers in the financial industry, covering 100% of all major domestic banks, and the customer structure has been continuously optimized. Among them, the large bank customers with assets of more than one trillion yuan, including policy banks, state-owned banks and joint-stock banks, have become the main customers of the company. The current bank IT business cycle is mainly dominated by the investment of big bank IT. In 2021, the business income of the company's cooperation with large bank customers increased by 32.57% compared with the same period last year, fully benefiting from the high growth dividend of major customers, and the company's basic business maintained steady growth. The high recognition of the company's products and solutions not only enhances the company's brand influence in the industry, but also helps the company to further expand and obtain more high-quality bank customers.

2022Q1 company is relatively sound, excluding the impact of share payments, deducting non-net profit to achieve 30% + growth. In the first quarter of 2022, the company's operation was affected by the epidemic, achieving operating income of 445 million yuan, an increase of 13.52% over the same period last year, slowing down; deducting a loss of 2.33 million yuan from non-net profit, considering that 12.1108 million yuan of share payment fees were included in the company's management expenses in the first quarter. After excluding, non-net profit increased by 30.3% over the same period last year, and the overall operation remained sound.

The company continued to increase investment in R & D. in the first quarter of 2022, R & D expenditure increased by 43.57% compared with the same period last year, and the R & D expenditure rate rose to a higher level of 17.13%.

The official release of "Tianyang Yun", through the cloud way to help small and medium-sized banks digital transformation, to create the company's second growth curve. On March 29, 2022, the company officially released "Tianyangyun", which is committed to providing a key driving force for speeding up the cloud process of banks and solving many painful points and difficult problems existing in small and medium-sized banks. Capital online has become one of its first strategic partners. With the general trend of the digital transformation of the banking industry, large state-owned banks and joint-stock banks mostly use the self-built mode to realize their digital transformation. however, due to the lack of investment in science and technology, the shortage of professionals, and the existing organizational mechanism can not meet the requirements of digital transformation for organizational agility, small and medium-sized banks adopt the cloud digital way to open and cooperate in the scene, data, technology and operation. It is the only way for the digital transformation of small and medium-sized banks. The Tianyang Cloud released this time runs from the SaaS layer to the IaaS layer, which is an overall solution. Based on the stable cloud base created by the partner IaaS layer, and based on the R & D and accumulation of its own investment in technology platform, data platform and aPaaS platform, the company transforms bank IT products into cloud services to provide to small and medium-sized bank customers. In the SaaS layer, Tianyang Cloud is subdivided into financial cloud, financial cloud and data cloud. The goal of the financial cloud is to solve the problem of digital transformation within the bank, focusing on the innovative business areas of the bank, the key business links of the bank and areas that are highly dependent on the digital level; the positioning of the financial cloud is to help the digital transformation of the industry, integrate industrial SaaS manufacturers and industry digital transformation manufacturers, and provide scene data and traffic for the development of financial business by improving the digital level of the industry. The positioning of the data cloud is to create an external data asset for the digital transformation of banks. In the future, the company will work with strategic partners to promote the digital transformation of small and medium-sized banks empowered by cloud computing. Cloud computing is expected to become the company's second growth curve, providing a new driving force for the company to achieve great-leap-forward development.

Investment advice: the company's credit card, risk management, customer relationship management, credit management, business intelligence and trading bank segment products are among the top three in the industry, while testing services and consulting services are also in the industry leading position. The advantage of the company's customer structure is obvious. In the future, while expanding and deepening large customers, we are committed to enabling the digital transformation of small and medium-sized banks through cloud-based way, while creating the company's second growth curve while the basic business is growing steadily. Driven by the digital transformation of banks and financial innovation, the IT sector of banks is highly prosperous. With the advantages of product power and customer structure, the company will continue to be one of the largest and fastest-growing banking IT solution providers in China in the future. According to the latest operating situation, we adjust our previous profit forecast for the company, and expect the company to achieve an operating income of 2.237 million yuan and a net profit of 1.43 million yuan in 2022-2024, respectively. The PE valuation corresponding to the company's current market capitalization is 19.6 times, maintaining the "buy" rating.

Risk hint: bank IT expenditure is not as expected, industry competition is further intensified, labor costs increase risk.